Mittal Europa

France’s Socialists are more bark than bite.

Christopher Caldwell

December 17, 2012, Vol. 18, No. 14

Ever since France’s Socialist president François Hollande arrived on the world stage, he has faced questions from his party rank-and-file. Is he radical enough to stand up for the left, as his rhetoric would indicate? Or willing to cut compromises with capitalists, as his career would indicate? He and his cabinet often claim to be acting in the spirit of Barack Obama. Much as the president has tried to make oil companies surrender leases they aren’t exploiting, Hollande campaigned on forcing companies that want to close down a production site to seek a buyer for it. Hollande’s recovery minister, Arnaud Montebourg, gave an interview to CNBC recently in which he defended the idea of nationalizing industries. “Barack Obama’s nationalized,” he said. “The Germans are nationalizing. All countries are nationalizing.” Over the past two weeks, Hollande has had an opportunity to put his money where his mouth is. The result has been a debacle for his government.

In September, Arcelor Mittal, the multinational steel giant, announced it would close two blast furnaces at its Florange facility in Lorraine, putting 629 jobs at risk. France had been through this routine before. In 2008, when Arcelor sought to close a plant in nearby Gandranges, Nicolas Sarkozy extracted a promise from the company to invest $400 million in new facilities, provided conditions in the steel market were favorable. Turns out they weren’t. Sarkozy wound up looking like a sap and giving the Socialists a campaign issue. So this time, when Arcelor announced the Florange closure, Montebourg laid into its leaders, accusing them of “lying” and “blackmail,” and threatening to nationalize the facility. Lakshmi Mittal, the company’s CEO, flew to France and the stage seemed set for a showdown. On November 30, Hollande’s prime minister, Jean-Marc Ayrault, announced that Mittal had “accepted the conditions I have laid out.” There would be no layoffs, and plenty of new investment.

Great, said representatives of the CFDT trade union. Let’s see the agreement. That is when things began unraveling.

Apparently, when the state acts like a businessman, as it does in France, it expects the same kind of confidentiality private businessmen do. Ayrault would not release the details, which were said to be in a two-page “secret accord.” Even Montebourg was reportedly not allowed to see them. Then investigative reporters at Le Canard Enchaîné obtained a copy and published it. The left was shocked. Hollande got even less than Sarkozy did. Arcelor promised about $225 million in spending, but all but $70 million of this was money that would have been spent anyway. Basically, layoffs would be replaced by buyouts. There were agreements on yet more closures, which were supposed to be temporary. And, crushingly, there was the mutual acknowledgment that Ulcos was not ready.

Ulcos stands for Ultra-Low-CO2 Steelmaking. An EU green-energy, anti-global warming project launched in 2004, it is the deus ex machina through which the Socialist party had promised Tomorrow’s Green Energy Jobs. Every country has something like it. It will save hundreds of millions in carbon credits—as soon as European governments can find a way to make companies pay more than 7 euros a ton for them. France alone has poured about $200 million into Ulcos, and the cost of the project will rise to $800 million. Other governments pay for much of the rest. But the hope is that 48 steel-making companies will pitch in, so Arcelor has already picked up a good deal of the cost. In asking for help on jobs, France was passing the church collection basket a second time.

The credulity that France’s working class brought to the promises of Ulcos was touching. As recently as last week, a CFDT spokesman told the French press: “We demand that the blast furnaces be kept on until the Ulcos project materializes.” The European Commission in Brussels was due to decide on December 20 whether to give grants of up to $300 million to an Ulcos program at Arcelor’s Florange plant. But not only has the project not materialized; the technology hasn’t either. On Thursday, Brussels announced that Arcelor had withdrawn its bid.

The left of the Socialist party and the trade union movement has flown into a rage. CFDT head Édouard Martin told reporters, “We have two enemies now, Mittal and the government.” (It has been years since American unionists have been so forthright in describing the companies that sign their paychecks as enemies.) Jean-Luc Mélenchon, who defected from the Socialists in 2008 to form his own Party of the Left, describes it as a “fresh betrayal.” Many in the French public see his point. One poll by OpinionWay found 59 percent would either favor or tolerate a nationalization of Florange.

All governments are uneasy coalitions between hacks and true believers. Generally you woo true believers with rhetoric and hacks with legislation. Hollande’s attempt to do that has failed. The true believers have won the public’s ear, and the hacks are scrambling to explain. Bruno Le Roux, leader of the Socialist deputies in the National Assembly, complained that Montebourg’s tactics had been too extreme. “What looked to us like a means of pressure was carried out as the only solution,” he told the press.

But it is Montebourg who has logic on his side here—if you throw around the claims Hollande has been throwing around, nationalization is the unique solution. France went into the era of deregulation with unreasonable expectations. A nationalized industry can serve as a jobs program, in a way that private industry cannot. That is why nationalizations were popular in the 20th century in the first place. “Public-private partnerships” can sometimes allow the state to act as a free-rider on private enterprise. But a free-rider does not get to steer.

When Arcelor Mittal reminded France of that last week, Hollande did not share the truth with his public. How could he? France resorted to the nuclear option—threatening nationalization—and got nothing out of it, not even, ultimately, the 600 jobs it set out to try to save. And in the process it has acquired a reputation as a place where no corporation can be assured its private-property interests will be respected in the slightest.

It would seem that corporations need not be so fearful. Hollande has proposed a 75 percent tax on high earners. He has said in speeches that he does not like the rich. Well, maybe he doesn’t like them, but he fears them. And as far as the rich are concerned, that will do just as well.